What is the Stock Market? A Beginners Guide to Stock Trading

What is the stock market? A beginners guide to stock market trading​

This guide provides a detailed overview of what the stock market is, understand stocks and what drives the value of a stock. By the end of this guide, you will have a solid basis to start trading and investing in stocks.

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When making any investment it is important to gain some understanding in what you’re getting into. This will allow you to achieve the best results possible and limits the amount of mistakes you make.

If you want to actually learn how to trade stocks, you’ll need a basic understanding on how stock trading works to begin with. After reading this stock market guide you will know exactly to get started trading stocks.

Let’s get into it.

How to trade stocks

If you’re looking to start trading stocks for the first time, you likely have a ton of questions. “What stocks should I buy?”, “Is X company a good investment?”, “Is $XX too much for this stock?”, sound familiar?

Slow down, before you place any trade in any sort of stock, you’re going to want to stop and make sure you understand how to go about making a decision of what stocks to trade — which brings us to how to trade stocks in just 7 steps:

  1. Get to know the stock market
  2. Learn the basics of trading
  3. Create a trading plan
  4. Open a trading account with a stock broker
  5. Practice before investing real money
  6. Mesure your returns
  7. Learn from your mistakes

1. Get to know the stock market

What is a stock?

A stock is a type of investment which allows you to have a share in a company. When you buy a stock from a business you’re essentially purchasing a small piece of that company, called a share. Owning shares of a company makes you a shareholder.

Investors typically buy stocks from companies they predict will increase in value over time. If this happens the stock can be sold for a profit. Many businesses distribute stocks to create an opportunity to raise money and invest to expand their company. Whilst for investors or potential investors like yourself, stocks enable a growth opportunity for your money and outpace inflation.

What is stock trading?

The stock market provides a secure and regulated environment for traders to buy and sell shares in publicly listed companies with low operational risk. The supply and demand of each company’s stock is tracked through stock exchanges, which directly affects stock prices.

A stock trader typically refers to someone who regularly buys and sells stocks to benefit from their daily price fluctuations.

The main goal when investing or trading the stock market is to make a profit by selling the stock for more than you paid for. Buy low, sell high. However, depending on your trading strategy you can also make money by speculating on the price to decrease in value.

2. Learn the basics of trading

You’re here because you want to learn how to trade. Maybe you’ve seen the success of a professional trader? Or maybe you just want more income. Whatever your reasons, learning to trade can change your life.

Starttrading.com is a free online e-learning platform aiming to teach people how to trade in a fun and interactive way. We offer an in-depth online trading academy that guides beginner traders from the basics through to advanced trading strategies, ensuring they have the skills and expertise to profitably trade the financial markets.

Our trading academy is 7 Units long and covers over 40+ lessons.

Signing up is easy, only taking 1 minute and most importantly 100% free.

Our course is designed to help you prepare for success in the financial markets. Not only will we teach you the technical and fundamental side of trading we will also teach you the mentality needed to trade like a pro. Simply sign up for a free account and start trading now.

3. Create a trading plan

trading plan gives you guidance on when and how you should trade. Without a plan, you might be constantly worrying about which market to trade, whether to take your profits early, let your losses run, or if you’re missing out on other opportunities in different markets.

It is vital for your trading plan to be personal to you. It’s no good copying someone else’s plan, because that person will very likely have different goals, attitudes and ideas to you. They will also almost certainly have a different amount of time and money to dedicate to trading.

By following a trading plan, and maintaining a trading diary, you can keep a record of what works for you and what doesn’t. This is useful for analysing your own performance and improving as a trader. A full record of every trade makes it much easier to learn from your mistakes, and to evaluate which trades you won (or lost) by luck or by judgment.

4. Open a trading account with a stock broker

What is a stock broker? 

Publicly listed companies sell their stock through a stock market exchange, such as the New York Stock Exchange (NYSE) or Nasdaq, although there are many other stock markets exchanges all over the globe.

Investors are then able to buy and sell these shares among themselves through stockbrokers. Stockbrokers are individuals or firms who are licensed to trade stocks through the exchange-this allows them to buy and sell at your request. In exchange for dealing with individuals trades, the broker collects a commission or a fee.

How to find a stock broker?

Picking your broker is not much different from picking a stock. It starts with knowing your investing style. And today you have more options than earlier generations could dream of.

As an investor, your choice in a broker is important because it has huge implications for how much you’ll pay in fees, the types of investments you have access to and what your eventual returns will amount to.

Your choice of broker should be influenced by your investment style. Are you a trader or a buy-and-hold investor?

Traders don’t hold onto stocks for a long time. They’re interested in quick gains greater than the market average based on short-term price volatility, and they may make many trade executions over a short time span. If you envision yourself as a day trader, you’ll want to look for a broker with very low execution fees, or trading fees could take a big bite out of your returns.

Recommended broker – Sign up

5. Practice before investing real money

Just about any reputable stock broker will allow you to open up a free demo account with them to allow you to experience real market conditions without putting your real money at risk. This allows you to make common beginner’s errors whilst you learn without having to pay for the consequences out of your own pocket.
 
Demo trading accounts have plenty of advantages, such as:
 
  • See if you like trading
  • Practice good money management techniques
  • Learn to manage your emotions when trading
  • Test a new trading strategy without risking real funds
Tip – Only move from a demo to a real trading account once you are confident and are achieving consistent results in the stock market.
 

6. Measure your returns

This is essential advice for all types of investors — not just beginners. Tracking how much you make on your demo account will give you a clear indication of how much you could be making when you start trading on a live (real) account. It is also important to measure your progress when you trade live funds. This will allow you to see how your trading strategy is performing under the current market conditions.

Measure your returns against an appropriate benchmark. The bottom-line goal for picking stocks is to be ahead of a benchmark index, such as the SNP500. Measuring results is key, and if a serious investor is unable to outperform the benchmark (something even pro investors struggle to do), then it makes financial sense to invest in a low-cost index mutual fund or ETF — essentially a basket of stocks whose performance closely aligns with that of one of the benchmark indexes.

7. Learn from your mistakes

When it comes to evaluating one’s trading performance, it is very useful to carry out regular reviews of past trades and think about whether something could have been done differently.
 
It’s ok to make mistakes, but not to repeat them, even the best traders make mistakes, we are all human. However, what separates successful traders from losers is that they learn from every mistake. Good traders keep an extensive trading journal,  detailing every trade they place. This allows you to continually improve your trading plan and create more consistent results.
 

Stock trading vs. investing: What’s the Difference?

You need to decide which type of trader you are and ask yourself exactly what you want to achieve by trading the stock market. With fluctuations in the market happening on a daily basis there are two main strategies used by investors: short-term trading (day trading) or long-term trading (investing) also known as buying and holding.

Day trading stocks:

Short term trading is about using the constant volatility and fluctuating prices in the market to your advantage. Traders using this method watch the markets for opportunities to buy low and sell high stocks, making numerous trades over a short time period.

This type of trading comes with the potential to make a fast profit, but is also associated with risks. It is incredibly difficult to predict how the price of a stock will change over the short term and the stock price could easily go against you.

Stock day traders also end up paying more capital tax the more frequently they sell their shares. This was likely done to encourage traders to trade over a long term scale. There are many styles of short term trading such as day trading, intraday trading and scalping.

Investing in stocks:

As mentioned earlier, investing in the stock market is a way to put your money to work for you. Investors who do best over the long term have a diversified portfolio of many stocks which they hold onto through good and bad times. This approach requires you to wait until the stock’s value has increased over an extended period of time.

Having patience and the ability to overlook short term fluctuations is needed with long term trading as it is the ongoing performance of the stock which is important not the recent ups and downs happening on a daily basis.

How to invest in stocks

Before you start trading or investing in stocks it is essential that the money you are investing is NOT more than you can afford to lose. This is due to the fact that you will need to be willing to lose some or all of that money as a beginner.

The stock market is forever fluctuating and you can never be in control of business setbacks. You also have to consider that the riskier the investment, the higher the potential rewards and losses. Correctly timing the stock market is a tricky thing to do as you have to choose the right opportunities twice – once when you buy the stock than another when you sell it.

Many first time investors believe that to make money in the market you have to pick individual stocks but this is not the case. It takes time and patience to build a diversified portfolio of individual stocks as you need to do your research in each individual investment.

Alternatively, you may want to consider using mutual and exchange-traded funds to benefit from a vast amount of top-performing companies.

What determines the stock price?

As I have mentioned a few times the prices in the stock market constantly fluctuate on a day to day basis, you might be asking yourself, what makes stock prices fall and rise?

The very straightforward answer is supply and demand. The price changes in the market reflect the supply and demand in that present moment so when a stock is seen as desirable then the stock price will increase. Factors could include a company’s recent success, a strong industry sector or just plain and simple popularity.

On the other hand, investors may be unwilling to purchase a stock due to a weak industry sector, company failings or the fact that the price is too high. This is called a lack of demand which will inevitably cause the stock price to drop. When this happens at some point the price will reach a point low enough for investors to start buying again where the cycle will repeat itself, this is known as market cycles.

Advantages of trading the stock market? 

  • Investment gains: The most prominent advantage of buying or selling stocks is investment gains. Over time the stock market tends to increase in value despite the prices of individual stocks fluctuating daily. Investments in steady companies that are able to grow to give investors returns on investment through profits. With the potential to grow wealth through value appreciation of assets the stock market attracts those with efforts to secure their financial future.
  • There are two trading methods to make money: The stock market gives you the option to make money on both a long term and short term basis. Some stocks also offer the opportunity to earn dividends which provides additional investment income. Dividends can be defined as a payment made by a business to its shareholders. The payouts are usually made in cash although they can also be distributed in stock dividends where stock shares are allocated to shareholders.  In essence, a dividend is basically a reward given to shareholders for owning stock in the corporation.
  • Easy to buy: Buying stocks isn’t as formal as it used to be, with electronic and technological advancements buying stocks online literally takes minutes. You can purchase your shares through a broker, financial planner or online.
  • The Best way to outpace inflation: Historically stocks have averaged an annualised return of 10% although it does mean you must have a longer time scope. Nevertheless, stock investments still outrun the average annualised inflation rate of 3.2%.

Disadvantages of trading the stock market? 

  • You could lose all your investment: When a company does poorly, the investors will sell allowing the stock prices to plummet. As you sell during the company’s hardship you are exposed to losing your initial investment. If losing your initial investment is something you can’t afford to do then you should consider buying bonds. This provides an income tax break if you lose money on your stock loss.
  • Can be very time consuming: Before buying a stock you have to research every company to determine how profitable it will be for you in the long run. You have to learn how to read financial statements, annual reports and keeping up to date with your company’s developments in the news. It is also required to monitor the stock itself as even the best company’s price will fall in the market.
  • Stock trading can be an emotional rollercoaster: Stock prices increase and decrease second by second and many individuals buy high out of greed and sell low out of fear. Focusing on the price fluctuations of stocks can be damaging to your investment especially without patience. It is best to check on a regular basis rather than constantly watch the prices.
  • You are competing with professionals: Along with knowledge and time professional traders and institutional investors have refined trading tools, computer systems and financial models at their disposal which some find intimidating.

Conclusion

To conclude although there are risks to investing in stocks, these can all be minimised with the right guidance and approach to what method of trading is best suited to your goals. Start trading provides services which can both teach and guide you into the right direction of a bright financial future in the stock market.

The hardest part of cryptocurrency trading is that all-important first step to getting started. At starttrading.com we make this step that little bit easier, you don’t have to start trading alone. Take your trading to the right level, simply sign up to our FREE online trading course so that we can give you the help you need today!

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What is Forex? Forex Trading for Beginners

What is the Forex market? Forex trading for beginners

The foreign exchange market, also known as Forex or “FX”, is the largest financial market in the world. There are many benefits of trading forex, which include convenient market hours, high liquidity and the ability to trade on margin. 

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If you’re looking to start trading forex online and feel as though it is a potential opportunity for you make money, you’re properly wondering about the best way to get your feet wet and learn how to get started in Forex trading.

It’s important to have an understanding of the markets and trading strategies used to trade so that you can more effectively manage your risk, make winning trades, and set yourself up for success in the financial markets.

What is Forex?

For those of you who are complete newbies to Forex trading and are trying to learn the ropes, it can often be an overwhelming and daunting world, but it doesn’t have to be.

To put it very simply, Forex, otherwise known as foreign exchange (FX), is simply the practice of exchanging one currency for another.

Have you ever been on a trip abroad and had to swap your Dollars (USD) for Euro (EUR)? Or how about exchanging your British Pounds (GBP) for Australian Dollars (AUD)? If you answered yes, then guess what?

You’ve already had your first experience as a Forex trader, although it’s pretty likely that you didn’t make any money in this trade.

The Forex market that you are here to learn how to trade is made up of a huge decentralized trading network that allows you to trade currencies from all over the world. And when we say huge, we mean enormous.

The Forex market has a daily trading volume of just over $5 trillion USD. This is pretty staggering when you compare it with the stock exchange market that has around $250 billion USD of daily trading volume.

This makes Forex the largest and most liquid trading market in the entire world, so the opportunity to make profits are aplenty! One of the main reasons why it is so popular is due to it being open for business 24 hours a day, 5 days a week.

Don’t worry you don’t have to be glued to your screen all day. The market is closed over the weekend which gives you time to take some rest, reflect on your past trades and step away from the charts for a little while.

How does Forex trading work?

In the Forex (FX) market, you essentially buy or sell currencies with the aim of making a profit from the changes in their value. Forex, also known as foreign exchange, is a decentralised global market where all the wvorld’s currencies trade.

If you’ve ever travelled to another country, you usually had to find a currency exchange broker and then exchange (swap) your local currency into the currency of the country you are visiting. This is the basic principle of the forex market, buying currencies when the price is going up and selling currencies when the price is going down.

You may have heard of the New York stock exchange (NYSE) and thought to yourself that this is where the real money is being made. It may be a surprise to you to find out that the Forex market is actually the giant when it comes to trading, transacting over $5 Trillion per day compared to $22.4 Billion per day on the NYSE.

With an average daily trading volume of $5 trillion, Forex is one of the most actively traded markets in the world. Due to this huge popularity, the Forex market attracts many UK traders, both beginners and experienced traders alike.

Why trade Forex? What are the main advantages of being a Forex trader?

Forex market hours

Unlike Wall Street, the Forex markets are open 24 hours a day, 5 days a week. This provides traders with a huge window of potential trading time to work with, which can be both a blessing and a curse.
 
  • Certain markets such as stocks often have opening and closing times meaning you can’t place orders outside of these times. However, the Forex market is a 24-hour market, 5 days week from the Australian Open to the New York Close. The Forex market closes on Friday night at 10pm (UK time) and does not open again until 9pm (UK time) on Sunday evening. However, because the market is only closed to retail traders (not central banks and related organisations), Forex trading actually does take place over the weekend. This means that there can be a difference in price between Friday close and Sunday open – known as a gap.
  • This is an advantage for those who want to trade part time because you can choose when you want to trade: morning, noon, night, during breakfast, or in your sleep. Because Forex is a truly global market, you can always take advantage of different active session’s forex trading hours.
  • Traders need to be highly aware of the weekend Forex trading hours and alter their positions accordingly. If you do not want to expose your position to the risk of gapping, you may want to consider closing your position on Friday evening or placing stops and limits to manage this risk.

Tax-efficiency

Both spread betting and trading CFDs on forex can offer significant tax benefits:

  • Spread betting is completely tax-free.* There is no capital gains tax (CGT), as you never own the underlying asset
  • CFDs are not exempt from CGT. However, you can offset your losses against your profits for your CGT liability, which makes CFDs useful for hedging

Trade a wide range of currency pairs

Forex trading gives you the opportunity to trade a wide variety of currency pairs, speculating on global events and the relative strength of major and minor economies.

With most Forex brokers you can choose from over 80 currency pairs, including:

  • Major currency pairs, eg GBP/USD, EUR/USD, and USD/JPY
  • Minor pairs, eg USD/ZAR, SGB/JPY, CAD/CHF
  • Emerging currency pairs, eg USD/CNH, EUR/RUB and AUD/CNH
  • Exotic pairs, eg EUR/CZK, TRY/JPY, USD/MXN

Learn more about currency pairs and how to trade them in our free online trading course

Leverage can make your money go further

  • Leverage or margin trading offers the ability to make large profits from a relatively small investment. Leverage in Forex enables you to open a position against a currency pair by paying just a small proportion of the full value up front, similar to a deposit. The profit or loss you make will reflect that of the full position, not just the deposit (margin). However, this can also amplify losses, meaning losses could exceed your initial deposit. For this reason, it’s important to refer to our 6 risk management tips to stay as safe as possible whilst trading.

Hedge with Forex

Hedging is a technique that can be used to reduce the risk of unwanted moves in the forex market, by opening multiple strategic positions.

There are a variety of strategies you can use to hedge Forex, but one of the most common is hedging with multiple currency pairs. By choosing forex pairs that are positively correlated, such as GBP/USD and EUR/USD, but taking positions in opposite directions, you can limit your downside risk. For example, a loss on a short EUR/USD position could be mitigated by a long position on GBP/USD.

Alternatively, you could use forex to hedge against loss in other markets, such as commodities. For example, because the USD/CAD generally has an inverse relationship with crude oil, it is commonly used as a hedge against falling oil prices.

Why trade Forex instead of Stocks?

Deciding whether to start trading Forex or Stocks is an important decision that you should base on which asset you are interested in trading – currencies or shares. Here are a few reasons why some traders prefer to trade Forex than Stocks:

  • Market opening hours: The stock market is limited to an exchange’s opening hours, whereas the Forex market is open 24-hours a day. However, it is worth noting that certain stock indices are available for weekend trading
  • Higher liquidity: the Forex market sees an average daily turnover of $5 trillion, whereas the stock market sees comparatively fewer trades per day
  • Greater volatility: the stock market tends to have more stable prices that change over a longer period of time. Although this is great for investing and some trading styles, the volatility of the Forex market can create an exciting range of opportunities for shorter-term traders.

When you are deciding whether you want to start trading the Forex or the Stock market, you should consider your attitude to risk and your financial goals.

Learn about the currencies you are trading

Before you start, you’ll need to understand what you’re trading. A vast majority of new traders tend to jump in and start trading anything that looks like it moves. Usually using high leverage and trade sporadically in either direction, ultimately leading to loss of money.
 

Understanding the currencies you are buying and selling makes all the difference. For example, currency may be beginning to increase in value after a large fall in price. Encouraging inexperienced traders to “try to catch the bottom.” The currency itself may have been falling due to bad employment reports for multiple months. Ask yourself, you would you buy something like that? Most likely not, this is why you need to know and understand what you buy and sell.

Currency trading is great because there are so many different currency pairs to trade. However, it doesn’t mean that you need to trade them all. It’s better to pick a few and focus on those, at Starttrading.com we’d recommend 3-6 if you are starting out. Having only a few will make it easy to keep up with economic news, politics and tendencies of the countries involved.

What are the main currencies in Forex?

Across the globe, there are hundreds of different currencies in use. Each of them are divided into two main sorts, major and exotics. All of the major currencies have been derived from the most powerful economies. These nations include the US (USD), Japan (JPY), the UK (GBP), the Euro Zone (EUR), Canada (CAD), Australia (AED), Switzerland (CHF) and New Zealand (NZD). These seven currency pairs make up almost 80% of the total daily trading volume.

What are the major FX pairs?

Trading EUR/ USD 

This is the most popular traded currency pair in the world, representing the two largest economies (Euro vs US Dollar) and has faced the most volatility since the inception of the euro in 1999.

Due to the high popularity of this conversion means that is always highly liquid, offering the potential for the competitiveness of price as offers to buy or sell are easy to find.

Trading USD/ JPY 

Being the second most popular trading pair in the world, the characteristics of this pair make it perfect for both the beginner and experienced Forex trader. Day traders have plenty of opportunities to turn a profit due to its high levels of volatility. The popularity of this pair also means that finding trading tips and Forex signals is relatively easy.

Although volatility is a benefit, traders should be aware that sudden price fluctuations can occur – so it can be easy for seemingly winning scenarios to become a loss. By conducting a thorough market analysis before trading, you can understand the patterns in price action and movements that may threaten economic growth in the market.

Trading GBP/ USD

Compared to other major pairs, there is often a much wider price range to play with, due to its unpredictability and volatility. It can move extremely quickly, which means professionals need to employ effective risk and money management strategies to avoid losing money when trading.

It is thought approximately 35% of the volume traded in the FX markets goes through London. However, when working with British pounds and the London Stock Exchange, traders with less experience may fall victim to misleading signals.

Trading USD/ CHF

In times of economic uncertainty or market turmoil, the Swiss franc has become a very safe investment. This is an excellent choice for traders who seek markets that are perceived as lower risk, as Switzerland has an exceptional reputation for stability, safety and neutrality.

The Swiss franc is also very similar to the British pounds in terms of volatility, price shifts, and technical characteristics. Therefore, if you are a beginner of trading with this currency there are plenty of bar charts, graphs, and forums which have been developed from experienced traders available for you to use.

What moves the Forex market?

It is essential that you understand the market before you make any investments or trades, determining exactly what moves the price and why can set you up for long term trading success. The Forex market consists of currencies from all over the globe, which can make exchange rate predictions extremely difficult as there are many factors that could add up to price movements. However, like most financial markets, Forex is primarily driven by the forces of supply and demand, and it is important to gain an understanding of the influences that drive price fluctuations.

The banks

The central banks control the currency supply, they can announce measures that will have a significant effect on their currency’s price. For example, quantitative easing involves injecting more money into an economy, causing the currency price to drop.

News reports

Commercial banks and other investors tend to want to invest their capital into economies that have a strong outlook. If a positive piece of news hits the markets about a certain country, it will encourage investment and increase demand for the local currency.

On the other hand, a negative piece of news can cause investors to pull their money and sell positions, in turn lowering a currency’s price. This is why currencies tend to reflect the reported economic health of the region they represent.

Market sentiment

Market sentiment, which is often in reaction to the news, can also play a major role in driving currency prices. If traders believe that a currency is headed in a certain direction, they will trade accordingly and may convince others to follow suit, increasing or decreasing demand.

How to learn Forex trading

Here at starttrading.com, our main aim is to provide individuals with the information and educational content they need to become a more successful trader. We have an entire team of professionals who would be more than happy to guide and support you on your trading journey, turning your wealth into success.

To learn more about our online trading and Forex trading courses. Include all of your relevant information and a member of our staff will get back to you as soon as possible, to discuss how we can best meet your requirements.

The importance of forex education

To start trading effectively, it’s critical to get the right forex education. You can find a lot of useful information on forex here at Starttrading.com. Spend time reading up on how forex trading works, forex pips, forex NFP, and risk management, for starters.

As you may learn over time, nothing beats experience, and if you want to learn forex trading, the experience is the best teacher. A trading mentor is always great to guide to and stop you making those rookie mistakes.

When starting out it is always recommended to open a forex demo account and try out some demo trading. It will give you a good technical understanding of the mechanics of making forex trades and getting used to trading on a trading platform.

No amount of trading books or networking can teach you better than experience the value of closing your trades and getting out of the market when your reasoning for getting into a trade becomes invalid. It is very easy for traders to think the market will come back around in their favour, letting their emotions get the better of them and cloud their judgement. You would be surprised how many traders fall prey to this trap and are left heartbroken and often out of pocket when the market only continues to trade against their anticipated direction.

This emphasises the famous and painfully true statement from John Maynard Keynes, “The market can stay irrational, longer than you can stay solvent.” Meaning, it does little to no good to say the market is acting irrationally and think it will come back in your favour (direction of your trade).

How to trade Forex?

Simply put, when you trade forex, you are buying one currency and selling another.

This always happens simultaneously, when you buy one, you are immediately selling another. This is the reason why currencies are always quoted in pairs.

Here are the top 5 forex currency pairs based on their trading volume:

  • Euro/Dollar (EUR/ USD)
  • Dollar/Japanese Yen (USD/ JPY)
  • British Pound Sterling/US Dollar (GBP/ USD)
  • US Dollar/Swiss Franc (USD/ CHF)
  • Australian Dollar/US Dollar (AUD/ USD)

Currency pairs will always rise and fall against each other for a varying number of reasons.

For example, if there is a particular political turmoil in one country, then the value of their currency may plummet – think GBP after Brexit was announced.

Forex produces price fluctuations each and every day in a wide number of currency pairs. These price movements are usually caused due to either fundamental or technical reasons, but we will go into these in much detail later on in the course.

It is these fluctuations that give traders opportunities to make a profit by correctly forecasting the direction that the price changes will move in.

What do you need to trade forex?

The beauty of the forex markets is that anybody can trade them. All you need is an internet connection, a device and enough cash to open up an account (this depends on the website or broker that you decide to use).

You can register a trading account with as little as $10 in most cases. However, as with anything, the more you put in the more you get out.

How to start trading Forex?

By now your probably eager to get started and what to know how to get set up placing your first trades. Its really easy to get started and you can start trading within 3 steps.

Step 1 – Open a trading account 

You need to open a trading account in order to start trading. The application process is simple and secure and you can apply for an online account at any time by filling in the online application form.

Once you have successfully completed the verification process, you will receive a confirmation email to confirm that your account is open.

You may receive a call from an account manager, in case you have any additional questions.

Step 2 – Fund your trading account

Once your account is open, you’ll need to deposit funds into it to start trading. You can do this in a variety of ways via the ‘Account’ tab in the trading platform.

Your initial deposit must be at least $1.

For more information on how you can transfer funds in and out of your account, visit NAGA

Step 3 – Start trading

Now you have an online trading account and have deposited funds, you can utilize all of NAGAs innovate features to start trading. The social trading tool that takes your trading experience to another level. Beginner traders can benefit from automatically copying the professional traders live trades and strategies.

You can access live price feeds, streaming charts and news instantly and trade 24-hours a day. Good luck and safe trading.

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7 Steps to Start Trading Cryptocurrency Like a Pro

How to start trading cryptocurrency in 7 simple steps

Learn everything you need to know about Bitcoin (BTC), Ethereum (ETH),  Litecoin (LTC) or any other cryptocurrency, as-well as how to get started trading them in 7 simple steps.

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If you are reading this, you have probably heard of cryptocurrencies or more specific, the top trending cryptocurrency called Bitcoin. Another concept that has probably led you to this article is trading, whether it is stocks, the foreign exchange market or cryptocurrencies. However, this trading ultimate guide mainly focuses on cryptocurrencies and how to get started trading them.

Instead of going into all the details and lengthy discussions of the blockchain, bubbles, regulations, temporary hype etc, the fact remains that people are making money trading cryptocurrencies and you could be amongst them. It can be extremely difficult to find an accurate step by step guide on how to start trading cryptocurrencies but let’s just say you came to the right place.

Here is a 7 step guide for you to follow so that you can enter into the cryptocurrency markets and start earning today.

  1. Understanding cryptocurrency
  2. Learn to trade the cryptocurrency market
  3. Choose a cryptocurrency exchange
  4. Choose a cryptocurrency wallet
  5. Find a cryptocurrency to trade
  6. Manage your risk
  7. Start trading

1. Understanding cryptocurrency

Before investing or trading your hard-earned money, it is a good idea to get an understanding of the market.

Cryptocurrencies are tradeable digital assets or digital form of money. This virtual money is decentralised, meaning they are not backed or controlled by a government or a central bank of any country.

One of the most famous cryptocurrencies is Bitcoin, which was invented to create an alternative currency for anyone who wanted to opt-out of the traditional banking system during the 2008 Financial Crisis. Cryptocurrencies like Bitcoin want to make financial transactions more open and accessible to everyone around the world – which is why they have become so popular in recent years. Bitcoin transfers can be done with minimal processing fees – avoiding the high fees charged by traditional financial institutions.

How does cryptocurrency trading work? 

Just like trading the Foreign Exchange (Forex) market, cryptocurrency trading is the buying and selling of currencies to generate a profit. In its simplest form, you’re betting on the changing price difference between two different currencies. These funds are then used to place buy and sell orders against another currency. You make profits from selling, or closing orders at a higher price than you bought.

Trading cryptocurrencies works exactly the same as the forex market trading, but instead of selling and buying fiat currencies, such as euros or US dollars, traders buy and sell cryptocurrencies, such as Bitcoin, Ethereum or Litecoin.  You will usually exchange a fiat currency into a cryptocurrency and then, at a later date, back into a fiat currency, although there are traders and exchanges that allow cryptocurrency-to-cryptocurrency trading.

For example, you might speculate on the change of price between the Bitcoin and the US dollar.

If you think Bitcoin will increase in value you might enter a “Long” position. This means you buy Bitcoin as you believe that it will increase in value relative to the US dollar.

If you think Bitcoin will decrease in value you might enter a “Short” position instead. This means that you sell Bitcoin as you believe that it will decrease in value relative to the US dollar.

2. Learn how to trade the cryptocurrency market

You may or may not have some experience in trading the Stock or Forex (FX) markets, but the Cryptocurrency market is a whole different ‘game’. It is advised to study the cryptocurrency charts first before starting to trade them. Do not to assume that your skills attained by trading other markets will be sufficient and that your trading strategies will work the same in the crypto market. Traders often assume that skills and trading strategy’s developed in alternative financial markets can be applied to others, you need to take time and research each market respectively.

If you are a new trader in general, it is advised that you either start with a demo trading account and train yourself, or sign up to our FREE online trading academy which is designed to help you prepare for success in the financial markets. Not only will we teach you the technical and fundamental side of trading we will also teach you the mentally needed to trade like a pro. Simply sign up for a free account and learn how to trade today.

It is important to find a strategy for each trade you will make and apply these strategies in the cryptocurrency market. We have spent years developing ours, it may seem daunting at first but once you pick up the basics, picking up the rest of the knowledge can become a walk in the part.

What affects the price of a cryptocurrency?

Why is cryptocurrency so volatile? They are not as stable as currencies that have had centuries to develop. Bitcoin is the oldest coin on the market, and it has only been around since 2009. Nevertheless, there are a number of things that can affect cryptocurrencies:

No intrinsic value:

Most cryptocurrencies don’t sell a product, earn revenue or employ thousands of people. They generally don’t return dividends, and just a tiny amount of the total value of the currency goes into evolving it. Because of this, it is extremely difficult to value. How do we know if it is fundamentally overbought or oversold? When is it a good value or overpriced? Without any fundamentals to base this information off of, we can only rely on market sentiment, often dictated by the media that makes money on viewership.

Regulation:

The lack of regulation in the cryptocurrency space can play a factor in the volatility of the price. This low level of regulation allows for market manipulation. Often done by placing orders with the intent to cancel, whereas in a regulated market such as the foreign exchange placing fake orders is illegal. Creating these false orders can lead to a misrepresentation of market behaviour which can cause volatility with the false orders encouraging uncertainty.

Supply and demand:

Another reason the price of crypto is so volatile comes down to simple Economics. When the demand for an asset increases quicker than the supply, the price is likely to rise. We saw this come into play with Bitcoin during the Christmas period of 2017. The demand for Bitcoin was widespread due to the profit being made by traders throughout the year and the supply could not keep up with the massive uptake, which led to the price reaching an all-time high of around $20,000.

Lack of institutional capital:

While it is undeniable that some pretty impressive venture capital companies, hedge funds and high net-worth individuals are both fans of and investors in crypto, as a segment, most of the institutional capital is still on the sidelines. At the moment there has been little to no movement on a Bitcoin ETF or Mutual Fund, which is predicted to introduce much needed institutional volume into the cryptocurrency markets.

Media influence:

Just like government regulation, exposure in the media greatly affects a cryptocurrency’s price. Whenever a public figure makes a statement regarding cryptocurrencies or a major retailer starts accepting cryptocurrency as a form of payment, you will see the market respond.

Changes to technology:

When a cryptocurrency’s core technology is affected (either via an update or the finding of a flaw), the cryptocurrency’s price is also affected.

Market size:

The cryptocurrency market is only roughly 10 years old and still an emerging market. The total size of the cryptocurrency market is currently $250B. Although this is a huge amount, it is a small figure when compared to the foreign exchange market which totals around $5T per day. This is why the foreign exchange market is able to keep stability even when there are massive movements in the market. The same cannot be said about the cryptocurrency market. This allows a few big traders who hold a lot of currencies (referred to as whales) have the ability to shift the market by making huge transactions.

 



 

3. Choose a cryptocurrency exchange

Selecting a cryptocurrency exchange to purchase your first cryptocurrencies can be a daunting and overwhelming process. After all, there are over 200 cryptocurrency exchanges in today’s market, with 24-hour trade volume in the billions. So, how do you make your choice?

Here are a few attributes to look at while choosing your exchange of choice:

  • Geographical location and their constraints;
  • Transaction fees;
  • Security, anonymity, and customer support;
  • Ease of use and user interface;
  • Volume and liquidity of the exchange.

Note that the above list does not cover all needed attributes to consider while choosing an exchange but are a good solid basis to start off with. We will now take a closer look at each attribute named above:

Geographical location and constraints:

Two key things to consider while looking at the Constraints of Geographical locations of a crypto exchange is; Firstly, is the exchange limited to a specific geographical location or is it open to most countries, including yours. Secondly, is the exchange legal in your country. It would not help you if you were to register on an exchange which you cannot access or trade legally.

Depositing cryptocurrencies onto an exchange located in a highly politicized or anti-crypto country probably isn’t the smartest idea and could potentially cause more headache and strife in the future than its worth.

Transaction fees:

Another factor to consider is the fee’s charged by the exchange. If you plan on placing multiple trades on the exchange, this is an important factor to look out for.

Tip – The less fees you pay the exchange you more that stay in your pocket!

Security, anonymity, and customer support:

It is important to investigate the exchange’s history to find out whether the exchange has been subject to any past malicious attacks or phishing scams and also whether they engage with their community on a regular basis. While this may seem like common sense, avoid signing up for exchanges which have a known history of financial and security breaches, and who have disabled withdrawals for long periods of time.

It is advisable to look for exchanges with Two Factor Authentication (2FA) and Know-Your-Customer-Verification (KYC)

Volume and liquidity of the exchange:

An exchange with a large volume of trading is usually a good indicator of a crypto exchange’s liquidity and overall ability to fill a user’s order at any point in time. Based on the type of trading you’re looking to do, liquidity is an extremely important factor.

A highly liquid exchange with good volume will also reduce the spread and allow you to enter trades at better prices.

Ease of use and user interface:

If an exchange has a good User Interface, it is a good indication that they care about their user base and ease of buying and selling.

An easy to use trading platform will also make your life easier and make it less likely to cause you to make any mistakes. Remember that making a mistake whilst trading can result in you losing money!

A few exchanges to choose from are:

4. Choose a cryptocurrency wallet

After choosing your exchange, you need to create a crypto wallet to store and control your funds with. A cryptocurrency wallet is a place where you store encrypted passwords that represent your coins, it is the equivalent to storing money in a bank account.

There are several types of cryptocurrency wallets that provide different ways to store and access your digital currencies. To understand more about cryptocurrency wallets and how to decide which wallet is best for you, please read our guide on cryptocurrency wallets.

For beginners, we would recommend an online wallet for the ease of use and accessibility that they offer. An online wallet can be set up in a matter of minutes and function somewhat similar to online or mobile banking.

A few cryptocurrency wallets to choose from are:

It’s important to note that most exchanges have built-in wallets but it is best practice to store digital funds off exchanges as exchanges have fallen victim to hacks in the past. However, insurance companies are beginning to offer cryptocurrency insurance against theft.

5. Find a cryptocurrency to trade

After setting up your wallet, finding your exchange, and getting familiar with trading and the cryptocurrency markets you can now log onto your exchange and start trading. Before putting your money into any cryptocurrency, it is a good idea to first study the asset. Read our guide on how to evaluate different cryptocurrencies.

One of the best tools for this research is our cryptocurrency market cap page where you can find information on every coin and token available around the world. The data found there includes market capitalization, news, supply and trade volume. Listing them in chronological order of top cryptocurrency and can be used to know exactly what each coin represents and compare different cryptocurrencies with each other.

Tracking the latest cryptocurrency news daily is essential if you want to be successful in trading cryptocurrencies. Trading the news is very important when it comes to cryptocurrency trading, it’s important to use verified sources such as CoinDesk and CoinTelegraph. Learn how to start trading cryptocurrency news in our in-depth article. 

Be aware of false market hype and cryptocurrency scams, such as false ICOs. It is advised to study the token or coin thoroughly to make sure that you are buying a legitimate asset which will not disappear overnight. If you are still hesitant in which coin to buy you can always start on the top cryptocurrencies listed by market cap as they are the most popular at the moment with most people trusting them.

6. Manage your risk

Much like the diversification of other investment types, risk management is possible by diversifying a cryptocurrency portfolio. Going “all in,” so to speak, on one specific currency can be an incredibly risky move. Because of cryptocurrency’s volatility, beginner traders may want to start at a slow pace and gradually build a position. This is similar to dollar-cost averaging within stock investing. Plenty of traders also solely trade with only a fraction of their available funds or holdings.

Admittedly, keeping a portion of your money out of harm’s way could limit potential gain. However, it also limits losses. This means that you can continue to trade, as well as gain some wisdom from the experience.

Here are some tips to help you manage your risk like a cryptocurrency pro:

Only invest what you can lose:

If you are investing money you can’t afford to lose, you need to take a step back and re-evaluate your current financial situation, because what you’re about to do is an act of desperation. This includes: using credit cards, taking out mortgages, applying for loans, or selling everything and traveling the world (as glamorous as that sounds).

Always pay attention to Bitcoin:

Most altcoins (every cryptocurrency except Bitcoin) are pegged closely to Bitcoin. If Bitcoin price pump drastically, altcoins price can go down as people try to exit altcoins to ride the BTC profits; inversely, if Bitcoin prices dump drastically, altcoin prices can go down, too, as people exit altcoins to exchange back into fiat.

Never put all your eggs in one basket. Diversify:

While the potential to earn more is increased with the amount of money you invest into a coin, the potential to lose more is also magnified.

Don’t be greedy:

No one ever lost money taking a profit. As a coin begins to grow, the greed inside us grows along with it. If a coin increases by 30%, why not consider taking profit? Get into the habit of taking profits and scouting for re-entry if you want to continue reaping potential profits.

Don’t invest blindly:

There are people in this world who would sell a blind person a pair of glasses if they could make money. Those same people play in the cryptocurrency markets and use every opportunity to exploit less-informed investors. They’ll tell you what to buy or claim certain coins will moon, just to increase the prices so they can exit. Also remember to do your own research!

Always learn from your mistakes:

Never accept a total loss. Always evaluate the situation and try to figure out why it happened. Take that experience as an asset for your next move, which will be better because you are know more now than you knew before. We all start off as amateurs, and we have all lost money throughout out trading experience.

7. Start trading

After you have completed all the above steps, you are ready to start trading. Here are a few tips to remember before setting off into the cryptocurrency trading universe:

Tip 1

You don’t have to buy a whole coin. cryptocurrencies allow traders to buy fractions of coins. This is a feature not a lot of new traders know, thus demotivating them not to start trading due to the high price of coins such as Bitcoin (BTC). You simply do not need to buy 1 whole Bitcoin (BTC) and can simply buy a fraction of a Bitcoin (BTC). This is the same across most of the tokens created in the cryptocurrency market.

Most of the top coins are expensive, so consider buying fractions of these coins to start if you don’t want to start trading with enormous amounts of money. Rather consider and predict which cryptocurrency is most likely to increase in and retain value and focus less on its current price.

If you would like to own for example 10 Litecoin (LTC), you can periodically buy additional fractions and grow your portfolio whilst still keeping your balance. This is also a good strategy to optimize the average price, known as dollar-cost averaging.

Tip 2

Keep in mind that the cryptocurrency market is volatile at this stage of its life! There is always the chance that the market will move rapidly in any single moment. Thus, include this into your trading strategies and adapt as the market changes.

Tip 3

Don’t trade with money that you cannot afford to lose! If you have been in the trading scene for a while you will hear this phrase a lot. This term must not be misinterpreted. This phrase does not mean that you must be willing to lose this money, it only means that if the worst-case scenario plays out, you will not feel the impact of losing this money and still be able to live your life as before losing this money.

If you have the mentality that you can lose this money, you have already made your first mistake. The aim is not to be comfortable with losing money, but if this happens, you still have a basis to work from and not have to start from scratch again.

Conclusion

Cryptocurrency trading is still in its infant stage, if you can stick out the learning curve, you will be glad you started. Always stay calm and do not attach emotions to trading, have a strategy and follow it. Stay open-minded and do not let your emotions stop you from making trades.

The hardest part of cryptocurrency trading is that all-important first step to getting started. At starttrading.com we make this step that little bit easier, you don’t have to start trading alone. Take your trading to the right level, simply sign up to our FREE online trading course so that we can give you the help you need today!

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